Recap 7-23-12

Europe:

  • According to reports over the weekend, the IMF is preparing to withdraw its financial support for Greece as the fund increasingly has lost confidence in the country being able to bring its debt/GDP ratio down to 120%. Greece could wind up defaulting as soon as September. The country has a 3.2bn bond held by the ECB that matures on August 20th.
  • The risk of Greece leaving the Eurozone is now seen as manageable, Der Spiegel said. In order to avoid a contagion effect, Eurozone governments want to wait until Europe’s permanent rescue fund ESM is in operation.
  • According to a newspaper report, Merkel won’t ask the German parliament to approve additional aid for Greece. Bloomberg
  • Spanish 2y yields broke above 6%
  • Italy reintroduced short selling bans on financial stocks, effective immediately and lasting at least through this week.
  • Spanish regulators banned short selling for 3 months
  • EU Consumer Confidence declined to -21.6 in July vs -20 exp and -19.8 prev

Elsewhere:

  • JPM: 118 companies in the S&P have reported w/86 of them (73%) “beating” EPS expectations (the average “surprise” was 4.7%). However, only 50 companies have exceeded sales forecasts (42%). Financials have on average been exceeding expectations by the largest margin (11.3%)
  • Japan’s finance minister delivered a fresh warning about the strong yen. Reuters/WSJ
  • The US is moving forward w/a plan to forcibly remove the Assad government. The White House will ramp up aid to Syrian rebels and will work to build a coalition of like-minded countries to remove Assad. NYT

Upcoming Data:

  • Mon: China HSBC Flash Mfg PMI
  • Tues: EU PMI, US Markit PMI, RichmondFed, Japan Trade Balance, Australia CPI
  • Wed: German IFO, UK GDP,
  • Thurs: US DGO, Jobless Claims, Pending Home Sales, Japan CPI
  • Fri: German CPI, US DGP, UMichigan Confidence

Commentary & Links:

Spain has a 12.9bn issue coming due on 7/30. At this rate, it will be difficult for Spain to roll it over. If so, the EFSF will have to intervene, or the ECB may have to activate the SMP again…

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2 thoughts on “Recap 7-23-12

  1. Looks like Spain has about $14bl in gold reserves, maybe they will have to put some of that in play…..or maybe they hold that till things get worse??

    1. Hmm, I’m not sure if they’ll be able to sell much of that on short notice. They may have to borrow against it first. Also, not sure if the ECB will allow them to do that. The gold may give the ECB something to claim against in case the Spanish central bank took too many loses via the ELA. It’s all pretty murky to me…

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